Trust & Network Effects

Ever ask yourself why Silicon Valley is the tech capital of the world? Why not Silicon Alley? Or Route 128? Sure, you can point to institutions like Stanford, the abundance of STEM research, significant military spending, welfare capitalism, emigration, the creation radio, the silicon chip, or even the beautiful, Mediterranean climate. But how was the Valley able to succeed? How was Fairchild able to bring it all together and start the silicon revolution? These are questions that I’ve been motivated to answer for quite some time. And I’ve come to an interesting, yet obvious conclusion.

Silicon Valley was built through trust and network effects. The Valley, unlike Silicon Alley or Route 128, was free to collaborate and share ideas. Not only was it allowed, but it was encouraged. And it benefited from this increased level of trust. The powerhouse industries of New York (finance) and Boston (biotech) do not possess this level of trust and therefore missed out on the inevitable network effects that bolstered Silicon Valley. To clarify, industries like biotech do not openly share research in progress, just like most financiers don’t openly share their soon to be investments. The Valley, on the other hand, openly discussed technology and desired investment opportunities. And those who collaborated and spoke openly were often the most successful. Despite the other reasons for the Valley’s growth, I am confident that trust and network effects are the basis. Assuming the trust continues, so will the network effects, and so will it’s continued success.

I am also excited to see these ecosystems growing in tier 2 tech cities like New York and Boston. Many will argue that this ecosystem has been prevalent for years, but not on the tier 1 level of Silicon Valley. The Valley stands alone. With that said, I expect to see significant technological displacement from the Valley in the coming decades. And as more and more unicorns start to come out of tier 2 (and tier 3) regions, capital, infrastructure, and greater success will follow.


Originally published at on October 16, 2015.